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Black Sea questions, South Asian rice, the ethanol effect – IGC on grains in 2012 February

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IGC's supply and demand graphs for; top row - total grains, wheat, maize; bottom row - rice, soyabean, and IGC freight index

The International Grains Council (IGC) has released its grains market report for February 2012. In its market commentary, which is a cogent 250-word summation of 1,840 million tons of produce and where it will go, the IGC has said:

Grain and oilseed markets mostly strengthened in the past month, the IGC daily index (GOI) up 6% to near four-month highs. The upturn reflected concerns in early February about maize and soyabean crops in South America, as well as the impact of the recent severe cold spell in parts of Europe and the CIS.  Moreover, after a very high rate of shipments from the Black Sea region in the first half of the season, sales activity declined, with US grain, in particular, attracting much more buying interest.

Wheat export prices in Europe climbed by some 8%, in somewhat tighter markets, with reports of logistical problems and possible future export restrictions in the Black Sea region (though denied), seen as potentially bullish. However, global supplies appear ample, with the likelihood that a portion of upcoming large South Asian wheat harvests will be offered for export. US maize (corn) values remained firm, supported by reports of crop losses in South America and active export interest for remaining old crop supplies, although forecasts of a further rise in US plantings this spring added a bearish element.

Oilseed prices rallied strongly in the past month, reflecting worries about the final outcome of soyabean crops in Argentina and Brazil, good demand for US supplies, including a new trade deal with China, and rising crude oil values. International rice market trends were more mixed, with Thai prices supported by domestic support measures but those in Vietnam, especially broken grades, easing to compete with South Asian offers.

[The IGC 2012 February grains market report is here. The data files as excel spreadsheets are available in this zip archive.]

The IGC’s sectoral advice is:

Grains: The world production estimate is lifted by 11m. tons, to 1,841m., largely because of upward revisions in Australia, Kazakhstan, Ukraine, India and Brazil, the latter because losses of its main maize crop will likely be more than compensated by a larger second crop. These upward revisions outweigh a reduced maize figure for Argentina. To an extent, the forecast of world consumption is adjusted higher to reflect the bigger crop estimates, with total use of grains placed 5m. tons above the January forecast, at 1,836m. The change is mainly for feed use, now put at 775m. tons, 4m. more than before and 4% higher than in 2010-11.

Of particular interest is the marked slowdown in the annual increase in industrial use, expected to rise by only 2% this year, with ethanol use of maize in the US set to recede slightly from its peak in 2011. While the latest statistical forecasts of supply and demand suggest that, nominally, global carryover stocks will rise slightly in 2011-12 from last year’s low figure, to 378m. tons (373m.), the total carryover in the eight major grain* exporters is still expected to dip by 6m. tons, to 131m., the smallest figure since 2007-08.

As this pair of charts shows, the Baltic Dry Freight Index has dropped not only to a one-year low, but is at a three-year low. Charts: Bloomberg

Wheat: A further increase in the global wheat production estimate for 2011-12, to 695m. tons (653m.), boosts total availabilities to 892m., their highest ever. Projected food and industrial consumption are both revised lower this month, but attractive prices, particularly compared with maize, lift the forecast of feed use by 2m. tons, to 131m. (115m.), the most since the early 1990s. Strong feed wheat demand is reflected in the global trade figure, helping to lift total wheat trade to match the 2008-09 peak, at 136.8m. tons (125.7m.). Even though total consumption is growing at a faster than average pace, world stocks are projected to rise to 211m. tons (196m.), eclipsing the previous record in 1999-00.

Maize (Corn): Maize production in 2011-12 is expected to increase by 4%, to a record 864m. tons. The US crop, while disappointing, was slightly above average, and bumper harvests were collected in China, Ukraine and the EU. A severe drought has reduced yield prospects in South America, especially in Argentina, but Brazil remains on track to produce a record crop. Improved supplies in some countries are boosting consumption, with overall use forecast at a record high. Feed use of maize is expected to increase at a faster than average pace but, with US ethanol production likely to decline slightly, the rise in industrial demand will be below trend. With demand outpacing the increase in supplies, ending stocks are forecast to tighten further, including in the US. Amid solid buying by a number of importers, world trade is forecast to rise to a four-year high.

Barley: Better than expected 2011-12 harvest results, including in Argentina and Australia, lift the estimate of world barley production by 1.1m. tons compared with last month, to 134.7m. World consumption is expected to remain steady, contained by uncompetitive prices in the feed sector, especially in the EU, and by sluggish growth in brewing demand. While higher than previously forecast, carryover stocks are set to remain tight, particularly in the EU and North America. The projection of world trade is raised by 1.2m. tons, to a three-year high of 17.8m., with a steep upturn in buying by Saudi Arabia.

Rice: Due to increases in Asia’s biggest producers, China and India, global rice output is projected to rise by 3% in 2011-12, to 463m. tons. The record outturn will be accompanied by a further expansion in demand, to 460m. tons (449m.), but the 2011-12 carryover is still expected to increase by 4%, to 99m. Much of the forecast rise in global stocks will be due to increases in the major exporters, notably in India and Thailand, seen 14% higher, at a record 32.7m. tons. World trade in 2012 is forecast to contract by 7%, to 32.2m. tons, owing to significantly reduced purchases by key Asian buyers, including Bangladesh and Indonesia.

Ocean freight rates between major export-import regions.

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IGC’s 2011 wrap-up – Eurozone crisis has affected crops, barring rice

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The International Grains Council has released its grain market report for November 2011. As this will be the IGC’s last report for the year, grain traders in the major exporting countries and buying countries will use this as their end-2011 reference. Here are the main forecasts by the IGC for major crops:

Market commentary – After showing some strength in early November, global grain export prices were again in retreat, though with rice once more the exception. Overall, IGC’s GOI index fell by 16 points, or 6%, to a 13-month low. The recent market downturn can be partly ascribed to bearishly perceived market fundamentals, as harvests neared completion in the northern hemisphere and work started south of the equator. But it was also in reaction to deepening financial uncertainties, notably in Europe, affecting nearly all commodities. Heavy supplies of wheat amid strong export competition, including from new crop grain out of Argentina and Australia, mostly reduced fob values by between $20 and $30 over the past month, narrowing the gap with Black Sea quotations.

Despite initial support from US cash markets and a smaller official crop estimate, CME maize futures in Chicago saw major speculative selling, partly due to increased competition from other exporters but with sentiment considerably dented by worries about the global financial crisis and the collapse of a major brokerage firm. Similar pressures were evident in oilseed markets, led by a decline in US soyabeans, values of which dipped to their lowest since October 2010. As measured by IGC’s sub-index for rice, export prices of this cereal remained firm in the past month: within this measure, quotations in Thailand saw further gains, attributed to the country’s severe floods, while those in Vietnam and South Asia weakened.

Grains – Reduced grain crop estimates for some major producers, including for maize in the US, are only partly offset by increases in the CIS and elsewhere, trimming the global production total for 2011-12 by 3m. tons from October, to 1,816m. This would still represent an increase of 64m. tons over last year, largely due to sizeable recoveries in output in Russia, Ukraine and Kazakhstan. Production of all crops except sorghum will rise this year, with the biggest increases in wheat and maize. Southern hemisphere prospects remain favourable, with rains in South America and Australia mostly boosting yield expectations for wheat and helpful for plantings of maize and sorghum. Consumption of grains will also increase in 2011-12, especially in the feed sector, including a marked rebound in Russia after the previous year’s drought.

At 1,826m. tons, world use is expected to show a rise of 2.2% from the previous year. However, a feature this year will be the marked slowdown in the expansion of industrial use, set to rise by only 1.7%, to 303m. tons. Within this figure, the use of grains in fuel ethanol, which has displayed huge growth in the past decade, is expected to stay close to last year’s 147m. tons, assuming the use of maize for this purpose in the US declines slightly. With the reduction in the global grain crop estimate largely balanced by an upward adjustment in the opening stocks figure and a slight cut in the use forecast, the projection of world carryover stocks is unchanged from last month, at 360m. tons.

[ Data – here are the IGC’s data files (all Excel): Total grains supply and demand ; Total grains trade ; Rice supply and demand ; Rice trade ; Soyabean trade ; IGC’s grains and oilseeds index ]

However, the total for the eight major exporters is trimmed by 3m. tons, largely because of a reduced stocks projection in the EU. World trade in grains in 2011-12 (July-June) is expected to climb by 11m. tons to a record 254m., 4m. more than forecast previously, reflecting larger than anticipated wheat purchases after this season’s marked upturn in medium and lower grade supplies, especially from the Black Sea region, whose total grain shipments are set to total 55m. tons, up from only 22m. last year.

Wheat – The second largest world wheat crop ever and ample carry-in stocks from last year, have sharply boosted global availabilities in 2011-12. While use is rising at a faster than normal pace, world stocks at the end of the season are still expected to climb to their highest level in a decade. Compared with last month, the estimate of world production is 1m. tons lower, at 683m., including a slight downward revision in the US, where the spring wheat crop was even smaller than expected.

Stronger than previously projected feed use adds another 2m. tons to the global consumption forecast, at 679m., boosting the annual percentage increase to about three times the longer-term trend. Because of the increased demand figure, the forecast of global carryover stocks is 2m. tons lower than last month, at 200m., but these would still be the largest since 2001-02. The world trade forecast is lifted by 3m. tons from before to nearly 135m., only slightly below the 2008-09 record. Rather than reflecting a supply shortfall in any one country or region (as it did in 2008-09, when Iran’s imports were higher than usual), import demand appears strong in a wide range of countries, aided by competitive pricing in the major exporters, especially for lower and medium grades.

Maize (corn) – While the US crop was slightly smaller than last year’s, larger outturns elsewhere are expected to lift world maize production to a new record of 853m. tons (826m.). With harvests in North America and Europe entering their final stages, attention is switching to the southern hemisphere, where farmers in Argentina, Brazil and South Africa are set to plant more maize than in 2010-11. Due to strong competition from feed-grade wheat and projected sluggish growth in industrial demand, world use is forecast to increase at a slower than average pace. However, with the total still expected to exceed output, 2011-12 ending stocks are forecast to fall to a five-year low. Trade in the year to June 2012 is forecast to increase by 1% due to strong demand from buyers in parts of Latin America, Asia and North Africa.

Rice – Flooding in parts of Asia has negatively affected crop prospects in some key exporters. Nevertheless, bigger outturns in China and India are expected to lift global production by 2% in 2011-12, to a record 459m. tons. Total rice use is also forecast to expand by 2%, with a further small increase projected in the global carryover, to 100m. tons (98m.). Within the total, inventories in the five major exporters are forecast to increase by 8%, to an all-time peak of 32m. tons. World trade in calendar 2012 is forecast to contract by 0.8m.tons, to 32.5m., on reduced imports by Far East Asia, especially by Bangladesh and Indonesia.

Food production and grain trade, Jan 2011

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The International Grains Council (IGC) has released its Grain Market Report for 2011 January. The IGC said that world grains supplies are forecast to tighten in 2010-11 but the outlook is little changed from two months ago. World production is expected to decline by 3.8%, to 1,726m. tons: the wheat estimate is lifted on better than expected southern hemisphere crops but the maize total is cut.

A serious drought has developed in eastern China over the past few months. Total precipitation has been scarce since October 2010, with some locations on the North China Plain receiving less than 10 percent of normal precipitation through December 2011. A lack of snow cover has deprived the dormant winter wheat crop of valuable moisture and protection from frigid temperatures and winds. Seasonably dry and cold weather is expected to continue for the next two weeks. USDA's WASDE said the impact of the drought has been mitigated by the widespread availability of water for irrigation, but crop stress could become serious if the drought continues after the winter wheat emerges from dormancy in February/March 2011.

By far the biggest fall in grains output was in drought-affected Russia, with big reductions too in the EU, the US, Kazakhstan and Ukraine. A further rise in world grains consumption is forecast in 2010-11, to 1,787m. tons. However, at 1.4%, the rise is flatter than in recent years. The expansion in industrial use has slowed markedly, especially in the US ethanol sector, although recent use there has been higher than anticipated. Total feed use will only rise moderately this year.

The forecast fall of 62m. tons in global carryover stocks mirrors the reduction in the major grain exporters, with big declines in Canada, the EU, Russia and the US. World trade in grains is expected to rise by 2m. tons, to 242m., only marginally more than before, with bigger imports by the EU and Russia expected to outweigh reductions in Near East and Far East Asia. Because of the fall of 29m. tons in Black Sea shipments, exports by Argentina, Australia, the EU and the US are expected to climb steeply.

IGC said that international grain and oilseed prices advanced strongly in December and again in January, with some values at their highest for two years. However, export prices remained below the peaks recorded early in 2008. While there has been little fundamental change in the overall supply and demand balance in the past two months, markets were driven higher by concerns about supplies of quality milling wheat and the tightening outlook for maize and soyabeans.

The influence of other commodities, including crude oil, also featured regularly on the major exchanges. For wheat, reports that the extremely wet conditions in eastern Australia would render at least one-third of the country’s large wheat crop unfit for flour milling were especially bullish. More recently, better prospects for US exports and a winter wheat acreage report showing a smaller than expected rise in Hard Red Winter wheat plantings further triggered buying.

USDA Crop Explorer, south India rice coverage, 2011 forecast

IGC said that China was among several recent customers for Australian feed grade wheat. For maize, there were worries about a reduced official US carryover forecast as well as about whether plantings for the next crop would be sufficient to prevent stocks falling further in 2011-12. The impact of dryness, attributed to the La Niña event, on Argentina’s upcoming harvest added to the market’s nervousness. Similarly, despite quite ample current stocks, US soyabean prices moved higher, initially because of continued heavy demand from China but more recently due to a lower official US supply estimate and strength in crude oil. Rice export prices also increased, but while Thai values in late-December climbed to a ten-month peak, they subsequently fell back as the main crop harvest advanced. After mostly declining since June, ocean freight rates for grains firmed slightly in recent months, despite a further slide in the Capesize sector.

The US Department of Agriculture’s World Agricultural Supply and Demand Estimates (WASDE) for 2011 January has said that global 2010-11 wheat supplies are raised slightly this month as increased beginning stocks are mostly offset by lower foreign production. Beginning stocks for Argentina are up 0.9 million tons with upward revisions to 2008-09 and 2009-10 production estimates. Argentina production is also raised 0.5 million tons for 2010-11 as harvest results indicate higher-than-expected yields. Production in Brazil is raised 0.4 million tons as favorably dry harvest weather boosted yields for the 2010-11 crop. EU-27 production is raised 0.3 million tons based on the latest official estimates for Poland. More than offsetting these increases are reductions for Kazakhstan and Australia. Kazakhstan production is lowered 1.3 million tons based on the latest government reports. Australia production is lowered 0.5 million tons as heavy late-December rains and flooding further increased crop losses in Queensland.

According to WASDE 2011 January, world wheat imports and exports for 2010-11 are both raised slightly. South Korea imports are raised 0.4 million tons, mostly offsetting an expected reduction in corn imports. Imports are also raised 0.2 million tons each for Thailand and Vietnam based on the pace of shipments to date and the increased availability of feed quality wheat in Australia. Imports are lowered 0.5 million tons for EU-27 based on the slow pace of import licenses to date. Major shifts among exporters are projected as importers focus on U.S. supplies to meet their milling needs. Australia exports are reduced 1.5 million tons as quality problems limit export opportunities. Kazakhstan exports are reduced 1.0 million tons with lower supplies. While Argentina marketing-year (December-November) exports are raised 0.5 million tons, exports during the remainder of the July-June world trade year are expected to be lower based on the slow pace of government export licensing.

Global 2010-11 wheat consumption is projected 1.2 million tons lower, mostly reflecting reduced wheat feeding in EU-27, the United States, and Kazakhstan. Food use is also lowered for EU-27 and Pakistan. Partly offsetting are increases in feed use in South Korea, Thailand, and Vietnam, and higher expected residual loss in Australia with the rain-damaged crop. Global ending stocks are raised 1.3 million tons with increases for EU-27, Argentina, and Australia, more than offsetting the U.S. reduction.

WASDE 2011 January said that global 2010-11 rice production, consumption, trade and ending stocks are lowered slightly from a month ago. The decrease in global rice production is due primarily to a smaller crop in Egypt, which is down 0.5 million tons (-14%) to 3.1 million. Egypt’s area harvested in 2010-11 is reduced 19 percent from a month ago and is down 30 percent from the previous year. A reduction in the Egyptian government’s support of producer prices has discouraged farmers from planting rice. Additionally, the Egyptian government has imposed water restrictions thus reducing irrigation water availability. Furthermore, government restrictions have reduced exports. Global imports are increased slightly due primarily to increases for Indonesia and Turkey, but partially offset by a reduction for Egypt. Global exports are increased slightly due mostly to an increase for Thailand, partially offset by a decrease for Egypt. World ending stocks are projected at 94.4 million tons, down 0.4 million from last month and last year.

Early price indicator for 2011 foodgrain

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Agrimoney has reported that London wheat for January delivery hit £198.40 a tonne on Thursday, beating the previous record for a spot contract of £197.50 a tonne set in September 2007.

“The peak came despite an uncertain performance by Chicago wheat, the global benchmark, which dipped in and out of negative territory in thin pre-holiday trade, and after disappointing US weekly export sales data. However, in London, prices continued to be boosted by data showing a doubling in UK wheat shipments in 2010-11, at a time when domestic demand has been lifted too by fresh capacity at plants converting the grain into ethanol.”

The buying was reflected too in wheat prices in Paris, where the January contract touched a two-year high of E250.00 a tonne, a two-year high and a “big psychological level for many in the market”, according to a grains analyst Agrimoney spoke to.

The market was finding that, despite the rises in prices of more than 80% in Paris since June, and more than 90% in London, “demand for wheat, and in particular milling quality wheat, has simply not been rationed”. And fundamentals both inside and outside the European Union “seem to offer little hope for a half to further price increases.

On 20 December, Reuters had reported (this is via Futurespros) that Chicago wheat futures rose more than 1 percent on Monday, taking the monthly gains to around 18% as weather concerns in top exporters United States and Australia continued to underpin the market.

“Chicago Board of Trade March wheat rose 1.45% to $7.64 a bushel.  CBOT front-month wheat has risen nearly 18% so far in December, the biggest monthly gains since July when the grain market jumped more than 40% as a severe drought ravaged crops across the Black Sea region. CBOT wheat is on track to post its first annual gain in three years after dropping 42% in the past two years, helped by a drought which decimated the Russian crop and halted exports and rains which reduced the quality of Australian wheat.”

Written by makanaka

December 24, 2010 at 11:19

Grain markets and trade for the last third of 2010

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Earth_Observatory-La_Nina

Continuing a trend that began earlier in the year, La Niña conditions strengthened through the summer of 2010, evidenced by a streak of cool water across the equatorial Pacific Ocean. This map reveals a broad swath of cool water stretching from South America to New Guinea. The ocean is not, however, uniformly cool. Pockets of warm water are mixed with the cool, particularly in the western Pacific. Warmer waters in this region can lead to increased rainfall, and La Niña conditions may have played a role in the devastating floods in Pakistan during the Northern Hemisphere summer of 2010. Over the eastern Pacific Ocean, cooler waters lead to less moisture along the coasts of North and South America. So as more rain pounds some parts of the globe, La Niña conditions can deepen drought in others. NASA Earth Observatory

The International Grains Council released its monthly Grain Market Report on 2010 September 23. In this report the IGC said that global grain prices advanced again in September, those for wheat having returned to the peaks reached in early August. While the initial trigger for the steep upturn in wheat and barley values in recent months was the fast deteriorating outlook for these crops in the Black Sea region, much of the more recent bullishness is attributed to concerns about smaller than anticipated US maize (corn) yields, as well as substantial new grain buying activity by importers.

The market commentary of the report said: “Another feature is the difficult harvest weather in some countries, affecting milling wheat and malting barley quality. US soyabean prices partly mirrored the upturn in maize, but were also supported by concerns about South American crop prospects and continued heavy buying by China. Asian rice prices moved higher, largely because of the impact of the flood emergency in Pakistan. The recent surge in world grain prices, while not on the same scale as in 2007-08, again prompted concerns about its impact on global food prices as well as the increased volatility in the major commodity exchanges. One measure of such volatility is the day-to-day change in futures values which, even allowing for the events of three years ago, is significantly greater than earlier in the decade. Given the generally adequate supply situation for wheat and other grains, despite recent crop concerns, many have expressed surprise at the ferocity of recent market responses.”

Grains outlook for 2010-11 – This year’s sharply reduced crops in the CIS and Europe will contribute to a fall of 1.2% in global grain supplies, reversing three successive years of stock building. World production in 2010-11 is forecast at 1,741m. tons, (1,787m.), 4m. below the previous month’s projection. This follows downward revisions, for maize in the US and wheat in the CIS region, more than offsetting improved prospects in Australia. Significant reductions in wheat and barley output will outweigh another rise in maize, although prospects for the latter crop are downgraded slightly. The difficult growing and harvesting conditions in parts of North America, Europe and the CIS have affected supplies of high-quality milling wheat and malting barley.

Grain consumption in 2010-11 is projected to increase by 0.6%, to 1,780m. tons, but this represents a marked slowing compared with previous years as the overall rate of expansion in industrial use, especially for ethanol in the US, is scaled back. In the animal feed sector, maize use is expected to be boosted, while that of wheat will likely hold steady, but this will be more than offset by reductions in barley and other grains. With global grains consumption expected to exceed output after three surplus years, global carryover stocks in 2010-11 are projected to fall by 39m. tons, to 353m., mostly because of declines in the world’s exporters, notably Russia and the US. However, the total carryover will remain significantly above the lows seen earlier in the past decade.

International Grains Council Grain Market Report 2010 September 23

International Grains Council wheat and maize export prices

Global trade in grains is expected to fall in 2010-11, mainly because of reduced wheat shipments. At 237m. tons (239m.), the total is 5m. above the August forecast, following upward revisions for the EU, Russia and sub-Saharan Africa. Export forecasts for several countries, including Australia, Canada and the US, have been lifted, with total availabilities still seen as ample in a year which will see a huge shift in trade away from the drought-afflicted Black Sea region. In all, wheat and coarse grains shipments from Kazakhstan, Russia and Ukraine will fall by 27m. tons compared with 2009-10, with around half of this shortfall likely to be sourced in the United States.

The US Department of Agriculture’s ‘Grain: World Markets and Trade’ September 2010 report is also out. It noted wheat trade changes in 2010-11 in this way:

Selected Exporters: Australia is down 500,000 tons to 15.5 million based on logistical constraints. Canada is boosted 2.0 million tons to 17.5 million due to larger exportable supplies. EU is lowered 3.0 million tons to 21.0 million on reduced exportable supplies and quality concerns, particularly for German wheat. Iran is raised 450,000 tons to 500,000 due to greater exportable supplies and opportunities opened by reduced supplies in Russia. Kazakhstan is up 500,000 tons to 6.5 million on higher Russian import demand. Russia is raised 500,000 tons to 3.5 million based on exports shipped before the ban. United States is boosted 1.0 million tons to 34.0 million on strong demand, particularly for higher quality wheat.

International Grains Council Grain Market Report 2010 September 23

International Grains Council rice and soyabean export prices

Selected Importers: Nigeria is up 400,000 tons to 4.0 million due to expected consumption growth. Russia is raised 1.4 million tons to 2.0 million due to increased demand for milling wheat caused by drought-reduced production.

The USDA report recorded trade changes in 2009-10 as “large late-season adjustments reflect reported shipments”. These are – Selected Exporters: Canada is up 500,000 tons to 19.0 million. The United Arab Emirates is raised 450,000 tons to 950,000. Selected Importers: Indonesia is down 450,000 tons to 5.4 million. Iran is up 600,000 tons to 3.6 million. Turkey is lowered 300,000 tons to 3.2 million.

Rice world markets and trade – Despite weather problems in China and Pakistan, global crop prospects remain excellent said the USDA report. Record world production is expected to not only meet rising demand but also maintain global stocks at the highest level since 2004.

International Grains Council Grain Market Report 2010 September 23

International Grains Council world grain estimates

Prices – though quotes from all origins are up somewhat from last month, Vietnam’s increase is the most dramatic. With 2010 contracts already at a record 6.2 million tons, Vietnam raised the minimum export price of 5% broken to $450 per ton FOB, essentially halting new sales and, for the first time, pushing above higher-quality U.S. #2/4 quotes ($445 per ton FOB). Vietnamese quotes are now only $30 below Thai 100B quotes, a stark departure from the $120 spread just 2 months ago. As sales stall in Vietnam, Thai sales are expected to increase as the government finally releases intervention stocks. U.S. long-grain sales are also expected to pick up on newfound competitiveness and a record crop. By contrast, the medium-grain trade is somewhat on hold as the California crop has yet to be harvested. In addition, many tenders in major markets have yet to be announced.

The USDA report forecast trade changes for 2011. These are – Pakistan’s exports are slashed 750,000 tons to 2.9 million as floods have reduced the crop and damaged infrastructure. Afghanistan’s imports are reduced 100,000 tons to 200,000, as Pakistan is by far the largest supplier due to proximity and relative prices. Iran’s imports are cut 300,000 tons to 1.2 million on the expectation that imports from Pakistan will fall. Thailand’s exports are down 500,000 tons to 9.0 million because the government stock release is happening much later in the year than originally anticipated. Vietnam’s exports are raised 450,000 tons to a record 6.2 million on contracts to date. By contrast, imports are dropped 100,000 tons to 400,000 on a slowdown of border trade with Cambodia. Indonesia’s imports are doubled to 500,000 tons as relatively high domestic prices have caused a surge in trade with neighboring countries. Iran’s imports are dropped 150,000 tons to 1.2 million on the pace of shipments. Nigeria’s imports are lowered 100,000 tons to 1.7 million on slower-than-expected imports from Thailand.

USDA August world grain bulletin

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The USDA (United States Department of Agriculture) Foreign Agricultural Service (FAS) has just released its August bulletin on world grain. It has made an effort to quell fears of a worldwide grain shortage by headlining the main report “No global shortage of food grains”, but the numbers provided indicate the reality at work. I have excerpted the important paras of the Grains report and the World Agricultural Production report. Also look at the table for wheat totals.

“Expectations that prices in the next few months will hit the record levels of 2007/08 levels are not substantiated by the reality of the global supply situation. Black Sea (Russia, Ukraine, Kazakhstan) wheat exports are expected to plummet 60 percent (21 MMT) on drought-reduced crops. However, traditional exporters, particularly the United States, are holding large supplies that are more than sufficient to compensate for the Black Sea shortfall. In fact, U.S. ending stocks at 26 million tons are three times larger than just a few years ago.”

Russia Wheat: Drought Has Reduced Yield by 40 Percent in Key Production Regions – “The USDA forecasts Russia wheat production for 2010/11 at 45.0 million tons, down 8.0 million or 15 percent from last month and down 16.7 million or 27 percent from last year. Area is estimated at 26.7 million hectares, down 0.1 million from last month due to a slight reduction in estimated winter wheat area. Winter wheat accounts for slightly less than half of the total wheat area but almost two-thirds of production due to higher yields. Yield is estimated at 1.69 tons per hectare, down 15 percent from last month, and down 19 percent from the five-year average. Severe and persistent drought has sharply reduced yield prospects in Russia’s Central, Volga, and Ural Districts. The Central District produces mostly winter wheat, and the Volga and Ural Districts produce mostly spring wheat.”

“Ministry of Agriculture harvest data from August 4 indicates that wheat yield is down 39 percent from last year in the Volga District, with harvest about 40 percent complete, and down 37 percent in the Central District, with harvest about 80 percent complete. The drought has extended into the western regions of Siberia, but conditions in Altai Krai, Siberia’s top wheat-producing territory, are reasonably good. Wheat harvest has not yet begun in the Ural or Siberian Districts. Wheat in the Southern and North Caucasus Districts largely escaped significant drought-related damage. These two districts are located in southern European Russia and typically produce about half of Russia’s winter wheat. Harvest reports show yields up 6 percent in the Southern District and up 8 percent in the North Caucasus District with harvest about 80 to 90 percent complete.”

EU Wheat Production Lower by 4.3 Million Tons Due to Rain, Dryness – “USDA estimates the 2010/11 European Union (EU) wheat crop at 137.5 million tons from 25.6 million hectares. The August production estimate is reduced 4.3 million tons or 3 percent from July. With area unchanged, yield dropped from 5.53 to 5.36 tons per hectare. Compared to last year, production is down 0.7 million tons or 0.5 percent while area is down 0.1 million hectares or 0.4 percent. The wheat crop suffered from a dry spring and early summer in the western EU countries and from excessive precipitation in the eastern countries. France, the EU’s largest wheat producer is now estimated to have harvested 37.5 million tons, 0.5 million less than last month and 0.8 million less than last year, even though area is up 5.5 percent from last year. Dryness has reduced France’s 2010/11 yield estimate to 6.91 tons per hectare versus 7.45 tons last year.”

“Germany’s crop is still being harvested, and is estimated at 24.0 million tons, down 1.5 million or 6 percent from last month and 5 percent from last year. Unfavorable dryness was followed by excessive precipitation. The impact of the dryness was exacerbated in areas with light soils and contributed to the estimated German yield reduction to 7.23 tons per hectare, compared to 7.81 tons reached in 2009/10. Near-record amounts of rainfall fell during the wheat harvest in southeastern Europe, lowering yields and quality. Hungary’s wheat crop estimate is reduced by 0.8 million tons from last month to 4.0 million tons, which is down 9 percent from last year. Romania’s crop is reduced 0.65 million tons to 6.2 million tons, 17 percent below last year, and Bulgaria’s crop is reduced 0.4 million from last month to 3.6 million tons, down 10 percent from last year.”

All Grain Summary Comparison – mt
Wheat Rice Milled Corn
08-09 09-10 10-11 08-09 09-10 10-11 08-09 09-10 10-11
Production
United States (Jun-May) 68 60.3 61.6 6.4 6.9 7.7 307.1 333 339.5
Other 615.2 620 584.1 441.6 435.7 451.5 490.7 475.4 492.1
World Total 683.3 680.3 645.7 448 442.6 459.2 797.8 808.4 831.6
Domestic Consumption
United States (Jun-May) 34.3 30.9 32.3 4 4 4 259.3 289.3 290.6
Other 601.8 619.6 629.9 431.9 431.8 450 520.4 523 539.6
World Total 636.1 650.5 662.2 435.9 435.8 454 779.7 812.3 830.2
Ending Stocks
United States (Jun-May) 17.9 26.5 25.9 1 1.1 1.8 42.5 36.2 33.3
Other 147.6 167.5 148.8 89.9 93.9 95.7 105 102.8 105.9
World Total 165.5 194 174.8 90.9 95 97.5 147.5 139 139.2
TY Imports
United States (Jun-May) 3.5 3.3 2.7 0.7 0.7 0.7 0.3 0.2 0.3
Other 136.7 126.4 119.2 26.1 27.6 28.1 82.1 85.4 88.9
World Total 140.2 129.6 121.9 26.8 28.3 28.8 82.5 85.6 89.2
TY Exports
United States (Jun-May) 27.3 24.2 33 3 3.5 3.5 47.8 50 52
Other 115.8 108.5 91.5 26.3 26.6 27.9 36.2 37.8 39.4
World Total 143.1 132.6 124.5 29.3 30.1 31.3 84 87.8 91.4
All Grain Summary Comparison – mt
Wheat Rice Milled Corn
2008/09 2009/10 2010/11 2008/09 2009/10 2010/11 2008/09 2009/10 2010/11
Production
United States (Jun-May) 68 60.3 61.6 6.4 6.9 7.7 307.1 333 339.5
Other 615.2 620 584.1 441.6 435.7 451.5 490.7 475.4 492.1
World Total 683.3 680.3 645.7 448 442.6 459.2 797.8 808.4 831.6
Domestic Consumption
United States (Jun-May) 34.3 30.9 32.3 4 4 4 259.3 289.3 290.6
Other 601.8 619.6 629.9 431.9 431.8 450 520.4 523 539.6
World Total 636.1 650.5 662.2 435.9 435.8 454 779.7 812.3 830.2
Ending Stocks
United States (Jun-May) 17.9 26.5 25.9 1 1.1 1.8 42.5 36.2 33.3
Other 147.6 167.5 148.8 89.9 93.9 95.7 105 102.8 105.9
World Total 165.5 194 174.8 90.9 95 97.5 147.5 139 139.2
TY Imports
United States (Jun-May) 3.5 3.3 2.7 0.7 0.7 0.7 0.3 0.2 0.3
Other 136.7 126.4 119.2 26.1 27.6 28.1 82.1 85.4 88.9
World Total 140.2 129.6 121.9 26.8 28.3 28.8 82.5 85.6 89.2
TY Exports
United States (Jun-May) 27.3 24.2 33 3 3.5 3.5 47.8 50 52
Other 115.8 108.5 91.5 26.3 26.6 27.9 36.2 37.8 39.4
World Total 143.1 132.6 124.5 29.3 30.1 31.3 84 87.8 91.4

Food production and grain trade, July 2010

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Economic Research Service of the United States Department of Agriculture (USDA), former Soviet Union wheatThe July 2010 news and analysis on the global grain trade market have much to do with the weather conditions in Russia and Central Asia. The Economic Research Service of the United States Department of Agriculture (USDA), the Food and Agriculture Organization (FAO) and the International Grains Council all concentrate on this region and the effect of an extraordinary heatwave on the wheat crops of Russia, Ukraine and Kazakhstan.

1) The Economic Research Service of the United States Department of Agriculture (USDA) said that the next decade is likely to see a major shift in global wheat production and trade. The largest gains in wheat production and exports will likely come from the region of the former Soviet Union (the one-time USSR), specifically Russia, Ukraine, and Kazakhstan, where changes in production efficiency and market forces combine to favor wheat. The USDA has projected that wheat exports by Russia, Ukraine, and Kazakhstan will increase by about 50% to over 50 million metric tons (mmt) by 2019. In the coming decade, the region may account for over half the growth in world wheat exports, perhaps even supplanting the U.S. as the “wheat breadbasket of the world”.

Economic Research Service of the United States Department of Agriculture (USDA), former Soviet Union wheatThe United States, the world’s largest wheat exporter since World War II, could slip to second place. US wheat production is projected to rise only slightly over the next decade, and exports are forecast to remain below the average for 2001-09. By 2019, according to USDA projections, Russia’s wheat exports will exceed those of the United States. And, total wheat exports from Russia, Ukraine, and Kazakhstan likely will be more than double those of the United States.

The USA has been the largest wheat exporter during the post-World War II period. However, the US share of world wheat exports could drop from an average of 24% in 2001-09 to an estimated 16% by 2019, with the annual volume of US wheat exports declining from 27.5 mmt during the 2000s to 24.5 mmt in 2019. The European Union, Canada, and Argentina also will lose shares of world wheat exports, while Australia will likely maintain its share. USDA projects that over the next 10 years, Russia, Ukraine, and Kazakhstan’s share of wheat exports could increase from less than 20% in the 2000s to over 33% in 2019. Russia and Ukraine are returning to their historical role, as during the Russian tsarist empire which ended in the late 1910s, of being major wheat exporters.

Economic Research Service of the United States Department of Agriculture (USDA), former Soviet Union wheat2) The Food and Agriculture Organization (FAO) has said that the impact of unfavourable weather events on crops in recent weeks has led FAO to cut its global wheat production forecast for 2010 to 651 million tonnes, from 676 million tonnes reported in June. But despite production problems in some leading exporting countries, the world wheat market remains far more balanced than at the time of the world food crisis in 2007-08 and fears of a new global food crisis are not justified at this point, said FAO.

A continuing, devastating drought afflicting crops in the Russian Federation, coupled with anticipated lower outputs in Kazakhstan and Ukraine have raised strong fears about the availability of world wheat supply in the 2010-11 marketing season. The turmoil in global wheat markets, which has intensified in recent weeks, is evidence of the growing dependence on the Black Sea region, an area renowned for erratic yields, as a major supplier of wheat to world markets. In addition, an expected production decline in Canada, another major producer and exporter of wheat, has reinforced market worries.

International wheat prices have jumped by over 50% since June. This rapid increase in prices is prompting concerns about a repeat of the crisis of 2007-08. But after two consecutive years of record crops, world inventories have been replenished sufficiently to cover the current anticipated production shortfall. Even more importantly, stocks held by the traditional wheat exporters, the main buffer against unexpected events, remain ample. The latest downgrading of world wheat production forecast for 2010 points to a tighter supply situation and increases the likelihood of higher wheat prices compared to the previous season. However, fears of a global food crisis are unwarranted at this stage. On the other hand, should the drought in the Russian Federation continue, it could pose problems for winter plantings in that country with potentially serious implications for world wheat supplies in 2011-12.

Food and Agriculture Organization (FAO) wheat outlook3) Heightened market concerns about the outcome of this year’s harvests in some key northern hemisphere exporters, especially wheat and barley in the Black Sea region, propelled prices of grains and oilseeds upwards in July, said the International Grains Council in its Grain Market Report of 29 July 2010. However, rice markets weakened further over the period. Milling wheat export quotations in the EU and the Black Sea region climbed by around US$70 per ton in response to reports of significant drought-induced yield losses in some areas, with markets also speculating about possible export restrictions in Russia and Ukraine. However, substantial new wheat sales were still being recorded from those countries.

Wheat futures in the US reached their highest levels in over a year, with considerable speculative activity, but export values nevertheless became increasingly competitive against other origins, with this year’s ample availabilities likely to spur a sharp recovery in foreign sales. US maize futures, having initially slumped to nine-month lows at the end of June, climbed steeply in early July in response to somewhat reduced US supply forecasts and the rally in wheat, but the gains over the period as a whole were quite modest, reflecting the generally favourable crop outlook. For oilseeds, much of the focus was on diminishing US old crop supplies of soyabeans as the season neared its end and the continued fast pace of exports, especially to China.

In contrast to the generally bullish tone of world wheat and coarse grains markets, international rice prices again moved lower in the absence of significant new buying in Far East Asia and the broadly favourable outlook for India’s next crop, although much depends on the final outcome of the summer monsoon. Ocean freight rates for grains and other dry bulk cargoes fell further in July although there were recent signs of increased chartering activity.